California FAIR Plan: Big Changes for 2020
After the Paradise fire in 2018 the landscape of home insurance changed for everyone in the state of California. 2019 will go down as the year of non renewals from home insurance carriers all across the state. The insurance industry posted huge losses due to wildfires and all the companies were rushing to reduce their exposure. The result was a vacuum where there were lots of homeowners and no insurance companies to cover them.
Historically, the California FAIR plan was always available for those homeowners that either had numerous claims, or they were in locations so risky that mainstream companies just didn't want to cover. In 2019 that all changed and the FAIR plan became one of the most issued policies in the state.
The good thing is that homeowners have an option. The bad news is that the FAIR plan has numerous limitations. The first major limitation is the coverage offered through the policy. There are no extended limits for dwelling coverage on the policy. There is no liability coverage. There is no water coverage. This meant that if you bought the FAIR plan you also needed to buy a Difference In Conditions policy through another company to add additional coverage.
The other difficult part is the payment options. FAIR plan only takes electronic checks. And they require a minimum of 40% down. So, if you have a 4000 policy you would be looking at 1600 cash down to start the policy. In addition you also need to pay a down payment for the secondary policy.
Here are some of the proposed changes coming to the FAIR plan in 2020:
Hopefully by the beginning of February there will be new payment options available along with the ability to take credit cards. Currently the only payment option accepted is electronic check.
At the beginning of April you will be able to get higher dwelling coverage for a home. The increase is from 1.5 million to 3 million. That may not seem like a big change, but if you have a large home on property not being able to insure your property to full value is a major issue. This will help those customers with large custom homes.
Beginning in June you may also be able to buy a policy that includes more coverage along the lines of an HO3 policy. That means one policy will include liability coverage and coverage for additional types of losses beyond fire.
These changes are a necessary stop gap measure. Without any other options in the state something needed to be done to make sure decent coverage is available for everyone.
The biggest concern is that the California FAIR plan has no competition. Entire cities could end up being insured with one company. If there is no competition then costs could skyrocket. The other issue is solvency. If there was another fire like one in Paradise even the best funded plans would have a hard time paying out for losses.
I'm impressed that the California department of insurance was able to act quickly and come up with solutions for the current insurance crisis in the state. Now, they just need to get standard carriers back into the fold.
If you are non renewed give us a call at 951-395-0754. We will run your fireline score and help you find the best carrier to cover your home.
Historically, the California FAIR plan was always available for those homeowners that either had numerous claims, or they were in locations so risky that mainstream companies just didn't want to cover. In 2019 that all changed and the FAIR plan became one of the most issued policies in the state.
The good thing is that homeowners have an option. The bad news is that the FAIR plan has numerous limitations. The first major limitation is the coverage offered through the policy. There are no extended limits for dwelling coverage on the policy. There is no liability coverage. There is no water coverage. This meant that if you bought the FAIR plan you also needed to buy a Difference In Conditions policy through another company to add additional coverage.
The other difficult part is the payment options. FAIR plan only takes electronic checks. And they require a minimum of 40% down. So, if you have a 4000 policy you would be looking at 1600 cash down to start the policy. In addition you also need to pay a down payment for the secondary policy.
Here are some of the proposed changes coming to the FAIR plan in 2020:
Hopefully by the beginning of February there will be new payment options available along with the ability to take credit cards. Currently the only payment option accepted is electronic check.
At the beginning of April you will be able to get higher dwelling coverage for a home. The increase is from 1.5 million to 3 million. That may not seem like a big change, but if you have a large home on property not being able to insure your property to full value is a major issue. This will help those customers with large custom homes.
Beginning in June you may also be able to buy a policy that includes more coverage along the lines of an HO3 policy. That means one policy will include liability coverage and coverage for additional types of losses beyond fire.
These changes are a necessary stop gap measure. Without any other options in the state something needed to be done to make sure decent coverage is available for everyone.
The biggest concern is that the California FAIR plan has no competition. Entire cities could end up being insured with one company. If there is no competition then costs could skyrocket. The other issue is solvency. If there was another fire like one in Paradise even the best funded plans would have a hard time paying out for losses.
I'm impressed that the California department of insurance was able to act quickly and come up with solutions for the current insurance crisis in the state. Now, they just need to get standard carriers back into the fold.
If you are non renewed give us a call at 951-395-0754. We will run your fireline score and help you find the best carrier to cover your home.
Coverage Options Available Through the FAIR Plan:
Dwelling: That covers the rebuild of your home and anything attached to the structure. The policy maxes out at the amount listed on your policy. There are no extended limits available.
Personal Property: All your belongings inside the home. Replacement cost is available. That gives you new stuff for your old.
Other Structures: Those are detached structures. Barns, Detached Garage, Sheds.
Fair Rental Value: Gives you money to live elsewhere if you can't live in the home because of smoke or fire damage.
Ordinance or Law: This would cover any building code upgrades needed to the home up to your policy limits.
Debris Removal: Gives you money to haul away debris damaged by a covered loss.
Fences: Covers your fences
Plants, Shrubs and Trees: Gives you money to replace landscaping if damaged by a covered loss.
Awnings: If you have a roll away awning or decorative awning it would help replace them in the event of fire. You can also add coverage for wind and hail damage.
Permitted Incidental Occupancy: If you have a home business and you use equipment for that business this would give you additional coverage.
You also have the option to add two endorsements:
ECE: Extended Coverage, Includes coverage for loss caused by wind or hail, explosion, riot or civil commotion, aircraft or Vehicle damage and Volcanic Eruption.
VMM: Adds coverage for Vandalism and Mischief.
Personal Property: All your belongings inside the home. Replacement cost is available. That gives you new stuff for your old.
Other Structures: Those are detached structures. Barns, Detached Garage, Sheds.
Fair Rental Value: Gives you money to live elsewhere if you can't live in the home because of smoke or fire damage.
Ordinance or Law: This would cover any building code upgrades needed to the home up to your policy limits.
Debris Removal: Gives you money to haul away debris damaged by a covered loss.
Fences: Covers your fences
Plants, Shrubs and Trees: Gives you money to replace landscaping if damaged by a covered loss.
Awnings: If you have a roll away awning or decorative awning it would help replace them in the event of fire. You can also add coverage for wind and hail damage.
Permitted Incidental Occupancy: If you have a home business and you use equipment for that business this would give you additional coverage.
You also have the option to add two endorsements:
ECE: Extended Coverage, Includes coverage for loss caused by wind or hail, explosion, riot or civil commotion, aircraft or Vehicle damage and Volcanic Eruption.
VMM: Adds coverage for Vandalism and Mischief.